Forensic probe fingers CEO at Sedibeng Water

A vital lifeline to the driest parts of the north-western reaches of South Africa has been in the spotlight with allegations of tender fraud made against two top officials, leading to their suspension.

Tradewin Takalani, the chief executive of a water utility that serves large swathes of three central provinces, is in hot water over a contract that ballooned from R460,000 to R2.7-million.

The contract was allegedly awarded after Takalani and another senior official received a “loan” from the beneficiary company to buy a petrol station.

Sedibeng Water, based in Bothaville, serves about two million people in Free State, North West and Northern Cape across an area stretching 100,000 square kilometres.

The allegations are among a raft of claims made against Takalani contained in two forensic reports commissioned by the water utility after it had received an anonymous tip-off letter detailing his alleged financial shenanigans.

The forensic reports, now the subject of disciplinary charges against Takalani and senior official Moses Lebitso, contain allegations of fraud, nepotism, bribery and abuse of power, and involve amounts of more than R275-million.

Lawyers for both men said they denied wrongdoing.

Despite being in possession of detailed charge sheets, the lawyers said they could not answer specific questions because they had not had access to the audit reports which informed the allegations and charges against them.

“The points which you seek clarity on are a function of the disciplinary enquiry. As such, we cannot speak to the merits or demerits of the allegations. Whatever outcomes may have been reached from the forensic investigation reports were arrived at without our clients' consultation or involvement.”

Trying to stop the leak

Takalani launched a high court application in January 2018 to have his suspension and disciplinary process set aside, based on the claim that former water affairs minister Nomvula Mokonyane had appointed the Sedibeng board, among others, in an improper manner.

The claim that Mokonyane’s board appointments are invalid looks set to succeed, but in May Takalani lost an urgent Labour Court application based on the same argument. There, the judge ruled that even if the board was removed, it would not invalidate the decision to suspend and charge him.

The scandal comes as Sedibeng Water is facing a cash crisis. It was owed almost R800-million by the national Department of Water and Sanitation and a staggering R3.3-billion by various municipalities as at January 31, 2018.

Power struggle

The scandal also emerges from what appears to have been a power struggle between Takalani and the chairman of the utility’s board, David Dikoko.

The anonymous letter which set the investigation in motion was sent to Dikoko in August 2017.

A source sympathetic to Takalani claimed the complaint emanated from a senior Sedibeng employee perceived as close to Mokonyane.

The source claimed Takalani was targeted because he had been resisting efforts to use Sedibeng for access to contracts related to the Vaal Gamagara Water Scheme project, which are worth up to R18-billion over the next few years.

The project includes replacing major pipelines feeding the water-scarce Northern Cape.

But another internal source, who did not want to be named, said there had been low-key accusations against Takalani over several years but that these had been dismissed without investigation.

“This time, the allegations were specific, the board couldn't just ignore them.”

Allegations

Among other things, the anonymous whistle-blower claimed in the letter to be in possession of statements from certain Sedibeng Water contractors alleging that Takalani “demanded 10% of the contract value from service providers after being appointed for tenders”.

The letter also alleged Takalani was involved in the irregular appointment of two named suppliers – one for water treatment chemicals and the other for water meters.

On August 18, 2017 the Sedibeng board resolved to place Takalani on special leave.

Subsequently the board called in two teams of forensic investigators: Entsika Consulting and Open Water Advanced Risk Solutions, which corroborated key allegations against Takalani and Lebitso, an executive responsible for procurement.

Their forensic reports led to detailed charges against the pair and the appointment of a high-powered disciplinary process presided over by retired appeals court judge Robert Nugent.

According to the charge sheet delivered to the accused, Takalani and Lebitso collaborated in setting up procurement procedures that were calculated to benefit themselves and were to the prejudice of Sedibeng Water.

They removed responsibility for procurement from the supply chain management department and transferred it to the shared services department, which Lebitso was appointed to oversee.

They allegedly acted in concert with certain contractors to inflate prices and attempted to solicit benefits for themselves.

Chemicals

These included a company supplying R112-million worth of water treatment chemicals which, amaBhungane has established, is headed by a former schoolteacher from Orkney who admitted that he did not have experience in the business.

Sole director of Global Water Solutions, Sera Madigage, said he stopped teaching in June 2014 and decided to concentrate on his business and landed his first contract with Sedibeng in March 2016 on a request for quote basis until the tender was advertised and he was reappointed in June 2017.

He said the contract value of the current tender was R8.9-million. Asked what experience he had in providing water treatment chemicals, and whether he had other contracts besides Sedibeng, Madigage said there was no experience needed to submit the bid except to have necessary qualified human resources with relevant skills to run the project.

Madigage also stated that he had other no contracts except for Sedibeng. “I am submitting various bids across the country and still have to be contracted if chosen,” he said.

In his high court application, Takalani dealt with this allegation, claiming Sedibeng Water had come under pressure from Parliament’s water and sanitation portfolio committee to source water purification chemicals from black economic empowerment companies.

“We did not know of any BEE companies which sold water purification chemicals. We approached the company that we were buying from at the time and asked them for references.”

He said the recommended company provided chemicals on a trial basis and subsequently won a tender: “Thus, I deny that there were any irregularities in the appointment ... I also deny that I benefitted from the purchase of such chemicals...”

10% 'kickback' request

According to the Open Water forensic report the allegation that Takalani and Lebitso were soliciting kickbacks from contractors was found to have some substance.

In one case, a company, whose director asked amaBhungane not to be identified, was awarded a R27-million borehole contract during 2016.

The company confirmed its allegation that Lebitso had solicited a 10% payment on every invoice billed.

The company refused to pay but Lebitso then allegedly suggested that a subcontractor should be brought into the contract.

The subcontractor, who was allegedly connected to a family member of Takalani, attempted to take over 90% of the work and buy the tender.

After this too was resisted the company said the relationship with Sedibeng became strained and payments were delayed, putting the business under cashflow pressure.

A second company, CMS Water Engineering, is recorded by Open Water as alleging that in 2015 a Sedibeng contract manager had solicited a 10% kickback, purportedly on the instruction of Takalani.

CMS refused, but was persuaded to offer 25% of the R60-million contract to a nominated subcontractor and paid R5.1-million to the subcontractor to source pumps and generators. CMS said the subcontractor failed to deliver the machinery or do any work on the project.

In his high court papers Takalani denied ever demanding or receiving 10% of the contract value from any contractor.

The Open Water report says CMS complained to Sedibeng about the contract manager's alleged attempt to solicit a bribe.

The report notes that when the contract manager was confronted by Sedibeng's human resources chief, he denied making such a demand but expressed shock at being singled out when the chief executive's relative was doing the same.

Shortly thereafter, Takalani allegedly procured the payment of a “golden-handshake” of nearly R1.7-million to the contract manager, which the charge sheet maintains was “unjustified, unlawful and exceeded his authority”.

Water meters

The tip-off letter flagged the irregular appointment of a company to supply pre-paid water meters to Sedibeng.

The Open Water report found that the company, Lesira-Teq, had been supplying meters without a contract for years – long before Takalani was promoted to chief executive in 2014.

“The sole use of Lesira-Teq for the provision of water meter services during the period 2006 to 2017 was irregular in that no tender process was followed or a contract existed,” the report states.

The charge sheet alleges that Lesira-Teq was overpaid between 2013 and 2017, while Lebitso had also ordered surplus meters for which there was no need and no budget.

It argues Takalani failed to remedy this until 2017, when the contract was put out to tender.

Then, according to the forensic report and the charge sheet, the tender was manipulated to favour Lesira-Teq again.

“Mr Takalani exposed Sedibeng Water to undue financial and project risk by failing to remedy the use of Lesira-Teq without a contract, and subsequently appointing the said service provider, notwithstanding the anomalies in the appointment process.”

The charge sheet alleges that Lebitso took personal control of the bid evaluation process and Takalani appointed Lesira-Teq at a contract price that was higher than that which the bid committee had approved.

Takalani told the high court: “I deny that there was any wrongful or unlawful conduct in relation to the contractor, Lesira-Teq. In particular, I deny that inflated prices were paid for its products.”

Lesira-Teq chief executive Edwin Sibiya told amaBhungane: “Lesira-Teq is aware of the Sedibeng Water Board audit and can confidently confirm a professional relationship with Sedibeng Water. As a result of our contractual obligation with Sedibeng Water, we are in no position to share any further information.

“Lesira-Teq ... operates within local legislation and follows ethical business practices.”

Petrol Station

One of the cases highlighted by the Open Water forensic audit and the charge sheet concerned a company called Molemomoagi Trading Enterprise.

The amounts were relatively small, but the evidence appears damning.

During 2014 and 2015 Takalani and Lebitso allegedly facilitated a payment of R2.7-million to Molemomoagi based on a R457 000 contract to renovate a warehouse for Sedibeng.

According to the charge sheet Takalani and Lebitso have business interests in a company called Estabiz, which they failed to declare.

The investigation revealed that there was “evidence from email correspondence” that Estabiz received a R1.8-million loan from an entity linked to Molemomoagi to purchase a filling station in Kanana village near Klerksdorp.

This was just four days before Molemomoagi was awarded the Sedibeng tender.

According to the Open Water investigation, Molemomoagi did not possess the requisite Construction Industry Development Board credentials and the company was registered on the Sedibeng Water database only a month after its appointment.

To date the project is yet to be completed and the work done was described as “substandard”, notwithstanding that Sedibeng Water paid an aggregate of R2.7-million, nearly six times the original contract value.

Molemomoagi director Phila Sekwele denied allegations that his company was appointed irregularly, telling amaBhungane that he went through proper tender procedures.

“My company was chosen based on a quote I submitted, I think it was four companies that bid. My initial quote was about R450 000 but Sedibeng wanted me to do more at that house so that is why the costs went up.”

He also denied any relationship with Takalani prior to the contract or knowing anything about the petrol station or a loan.

He did not respond to questions about an email reproduced in the Open Water report which purported to show him telling Takalani: “The funds are available to... Estabiz... for the purchase of Engen Kanana filling station. The purchase of 1.8 m for the site plus the working capital and franchise costs will be covered by these funds...”

The email was apparently sent just five days before the appointment of Molemomoagi to do work for Sedibeng.

Sekwele said he had no dealings with Sedibeng for the past two years.

He said he did not finish the contract because a Sedibeng manager had dismissed him: “I was just told to leave the site, I was not given a reason,” Sekwele said. DM